Date|NN :|: Wed|NNP ,|, 28|CD Feb|NNP 2001|CD 06:49:00|NN -|: 0800|CD (|( PST|NNP )|) From|IN :|: steven.kean@enron.com|NN To|TO :|: bernadette.hawkins@enron.com|NN Subject|NNP :|: Ken|NNP Lay|NNP 's|POS email|NN to|TO Sen.|NN Brulte|NNP Mime-|NNP Version|NNP :|: 1.0|CD Content-|NNP Type|NNP :|: text|NN /|NN plain|JJ ;|: charset|NN =|SYM ANSI|NNP _|NN X|NNP 3.4|CD -|: 1968|CD Content-|NNP Transfer-|NNP Encoding|NNP :|: quoted-printable|JJ X-From|NNP :|: Steven|NNP J|NNP Kean|NNP X-To|NNP :|: Bernadette|NNP Hawkins|NNP X-cc|NNP :|: X-bcc|NNP :|: X-Folder|NNP :|: \|NN Steven|NNP _|NN Kean|NNP _|NN June|NNP 2001|CD _|NN 1|CD \|NN Notes|NNP Folders|NNP \|NN All|DT documents|NNS X-Origin|NNP :|: KEAN-S|NNP X-FileName|NNP :|: skean|NN .|. nsf|NN -----|SYM Forwarded|NNP by|IN Steven|NNP J|NNP Kean|NNP /|NN NA|NNP /|NN Enron|NNP on|IN 02/28/2001|CD 02:48|NN PM|NNP -----|SYM 
Jeff|NNP Dasovich|NNP Sent|NNP by|IN :|: Jeff|NNP Dasovich|NNP 02/16/2001|CD 08:49|NN AM|NNP To|TO :|: Sandra|NNP McCubbin|NNP /|NN NA|NNP /|NN Enron|NNP @|IN Enron|NNP ,|, Susan|NNP J|NNP Mara|NNP /|NN NA|NNP /|NN Enron|NNP @|IN ENRON|NNP ,|, MDay@GMSSR.com|NN ,|, Hedy|NNP Govenar|NNP <|NN @|IN mail|NN .|. acom|NN 2|CD .|. com|NN >|NN @|IN ENRON|NNP ,|, Scott|NNP Govenar|NNP <|NN sgovenar@govadv.com|NN >|NN ,|, Paul|NNP Kaufman|NNP /|NN PDX|NNP /|NN ECT|NNP @|IN ECT|NNP ,|, James|NNP D|NNP Steffes|NNP /|NN NA|NNP /|NN Enron|NNP @|IN Enron|NNP ,|, Harry|NNP Kingerski|NNP /|NN NA|NNP /|NN Enron|NNP @|IN Enron|NNP ,|, Richard|NNP Shapiro|NNP /|NN NA|NNP /|NN Enron|NNP @|IN Enron|NNP ,|, skean@enron.com|NN ,|, mpalmer@enron.com|NN ,|, Karen|NNP Denne|NNP /|NN Corp|NNP /|NN Enron|NNP @|IN ENRON|NNP ,|, BTC|NNP <|NN BCragg@GMSSR.com|NN >|NN cc|NN :|: Subject|NNP :|: Ken|NNP Lay|NNP 's|POS email|NN to|TO Sen.|NN Brulte|NNP 

Greetings|NNP All|DT :|: 

First|LS ,|, I|PRP am|VBP apologizing|VBG in|IN advance|NN for|IN any|DT typos|NNS in|IN this|DT email|NN .|. 
Schedule|NNP i|NNP s|VBZ very|RB tight|JJ ,|, but|CC I|PRP wanted|VBD to|TO make|VB sure|JJ that|DT everyone|NN had|VBD it|PRP first|JJ thing|NN this|DT morning|NN ,|, with|IN some|DT back-up|NN info|NN that|IN I|PRP 've|VBP included|VBN below|IN .|. 

Attached|NNP is|VBZ the|DT email|NN that|WDT was|VBD sent|VBN to|TO Ken|NNP Lay|NNP 's|POS office|NN yesterday|NN evening|NN f|SYM or|CC delivery|NN to|TO Sen.|NN Brulte|NNP .|. 
It|PRP 's|VBZ of|IN course|NN confidential|JJ .|. 
Few|JJ points|NNS :|: 

I|PRP do|VBP n't|RB have|VB Bev|NNP 's|POS email|NN ,|, so|RB if|IN you|PRP could|MD please|VB forward|RB to|TO her|PRP$ ,|, that|WDT would|MD be|VB appreciated|VBN .|. 
As|IN we|PRP discussed|VBD (|( Jim|NNP ,|, Mike|NNP ,|, Bev|NNP ,|, Scott|NNP ,|, Hedy|NNP )|) on|IN our|PRP$ lengthy|JJ call|NN on|IN Wednesday|NNP ,|, I|PRP 'm|VBP assuming|VBG that|IN the|DT plan|NN is|VBZ still|RB to|TO "|'' wallpaper|NN "|'' Sacramento|NNP wi|NN th|NN our|PRP$ proposed|JJ legislation|NN .|. 
This|DT email|NN does|VBZ not|RB contain|VB the|DT legislation|NN .|. 
Mike|NNP sent|VBD the|DT "|'' final|JJ "|'' version|NN s|VBZ of|IN our|PRP$ legislation|NN out|IN yesterday|NN ,|, except|IN for|IN the|DT siting|VBG piece|NN ,|, which|WDT I|PRP believe|VBP Brian|NNP Cragg|NNP of|IN Mike|NNP 's|POS office|NN is|VBZ finalizing|VBG today|NN .|. 
You|PRP 'll|MD note|VB that|IN we|PRP promise|VBP Senator|NNP Brulte|NNP in|IN the|DT email|NN that|IN we|PRP 'll|MD deliver|VB to|TO his|PRP$ office|NN today|NN the|DT proposed|JJ legislation|NN .|. 
Again|RB ,|, based|VBN on|IN our|PRP$ call|NN on|IN Wednesday|NNP ,|, I|PRP 'm|VBP assuming|VBG that|IN we|PRP would|MD simultaneously|RB release|VB the|DT proposed|JJ legislation|NN to|TO the|DT rest|NN of|IN the|DT world|NN at|IN the|DT same|JJ time|NN .|. 
When|WRB we|PRP spoke|VBD on|IN Wednesday|NNP ,|, we|PRP decided|VBD that|IN the|DT Sacramento|NNP team|NN would|MD determine|VB to|TO whom|WP we|PRP would|MD circulate|VB the|DT proposed|JJ legislation|NN at|IN the|DT same|JJ time|NN that|IN we|PRP deliver|VBP the|DT Senator|NNP Brulte|NNP .|. 
I|PRP 'm|VBP assuming|VBG that|IN you|PRP folks|NNS will|MD handle|VB that|DT end|NN of|IN things|NNS .|. 
Please|VB let|VB us|PRP know|VB at|IN your|PRP$ convenience|NN to|TO whom|WP you|PRP 've|VBP decided|VBN to|TO circulate|VB .|. 
This|DT email|NN does|VBZ ,|, however|RB ,|, include|VBP a|DT "|'' summary|NN "|'' of|IN our|PRP$ proposed|JJ legislation|NN .|. 
But|CC I|PRP 'm|VBP not|RB certain|JJ that|IN the|DT summary|NN included|VBN in|IN this|DT email|NN is|VBZ the|DT appropriate|JJ language|NN to|TO distribute|VB "|'' to|TO the|DT world|NN ,|, "|'' or|CC if|IN we|PRP 'll|MD need|VB instead|RB to|TO tailor|NN some|DT new|JJ language|NN .|. 
I|PRP think|VBP we|PRP all|DT agreed|VBD that|IN we|PRP need|VBP a|DT "|'' one|CD pager|NN "|'' to|TO accompany|VB the|DT legislative|JJ package|NN so|IN that|IN we|PRP can|MD communicate|VB the|DT package|NN effectively|RB .|. 
We|PRP also|RB discussed|VBD the|DT need|NN to|TO quickly|RB develop|VB a|DT coalition|NN to|TO support|VB our|PRP$ proposals|NNS .|. 
We|PRP did|VBD n't|RB finalize|NN that|DT plan|NN .|. 
Perhaps|RB the|DT Sacramento|NNP team|NN coul|NN d|SYM propose|VB a|DT plan|NN to|TO do|VB that|DT .|. 
Perhaps|RB we|PRP could|MD start|VB with|IN our|PRP$ friends|NNS in|IN the|DT Direct|NNP Access|NNP coalition|NN ?|. 
We|PRP also|RB talked|VBD about|IN the|DT need|NN at|IN this|DT point|NN to|TO engage|VB in|IN PR|NNP and|CC to|TO get|VB the|DT PR|NNP machinery|NN activated|VBN ,|, also|RB with|IN the|DT goal|NN of|IN effectively|RB communicating|VBG our|PRP$ legislative|JJ package|NN /|NN message|NN .|. 
We|PRP 're|VBP in|IN a|DT meeting|NN with|IN folks|NNS today|NN where|WRB we|PRP can|MD discuss|VB getting|VBG that|DT side|NN of|IN things|NNS going|VBG and|CC Karen|NNP Denne|NNP has|VBZ contacted|VBN Marathon|NNP and|CC they|PRP 're|VBP pondering|VBG some|DT things|NNS that|IN we|PRP can|MD do|VB in|IN the|DT near|JJ term|NN .|. 
You|PRP 'll|MD note|VB that|IN there|EX 's|VBZ a|DT considerable|JJ amount|NN of|IN information|NN about|IN the|DT DWR|NNP credit|NN issue|NN .|. 
As|IN I|PRP recollect|NN ,|, we|PRP discussed|VBD the|DT issue|NN in|IN depth|NN on|IN the|DT call|NN .|. 
You|PRP note|VBP that|WDT attached|VBD to|TO the|DT email|NN is|VBZ a|DT "|'' legislative|JJ fix|NN "|'' to|TO AB|NNP 1|CD X|NNP that|DT cou|NN ld|NN solve|VB the|DT credit|NN issue|NN and|CC an|DT attached|JJ set|NN of|IN "|'' taking|VBG points|NNS "|'' related|VBN to|TO a|DT second|JJ alternative|NN to|TO solving|VBG the|DT credit|NN issue|NN :|: a|DT PUC|NNP order|NN clarifying|VBG tha|NN t|NN DWR|NNP will|MD get|VB its|PRP$ money|NN for|IN power|NN purchase|NN costs|NNS .|. 
Note|VB also|RB that|IN Steve|NNP Kean|NNP reminded|VBD me|PRP that|IN we|PRP 've|VBP got|VBN to|TO continue|VB to|TO push|VB to|TO get|VB the|DT utilities|NNS out|IN of|IN the|DT merchant|NN function|NN .|. 
Accordingly|RB ,|, I|PRP 've|VBP put|VBN a|DT brief|JJ paragraph|NN on|IN that|DT issue|NN in|IN the|DT note|NN to|TO Brulte|NNP in|IN the|DT last|JJ section|NN (|( legislative|JJ solution|NN )|) under|IN the|DT topic|NN "|'' create|VB a|DT real|JJ competitive|JJ retail|JJ market|NN in|IN California|NNP .|. "|'' 
To|TO the|DT best|JJS of|IN my|PRP$ knowledge|NN ,|, we|PRP do|VBP n't|RB have|VB legislative|JJ language|NN on|IN that|DT piece|NN yet|RB ,|, and|CC it|PRP seems|VBZ that|IN we|PRP 'll|MD need|VB to|TO discuss|VB it|PRP in|IN considerably|RB more|JJR depth|NN before|IN doing|VBG so|RB .|. 

If|IN you|PRP have|VBP any|DT questions|NNS about|IN any|DT of|IN the|DT materials|NNS in|IN the|DT email|NN ,|, please|VB do|VBP n't|RB hesitate|VB to|TO contact|VB me|PRP or|CC Jim|NNP or|CC Sandi|NNP to|TO discuss|VB .|. 
I|PRP can|MD be|VB best|RBS reached|VBN to|TO day|NN by|IN pager|NN at|IN 888.916|CD .7184|CD .|. 

Thanks|NNS to|TO all|DT for|IN helping|VBG pull|NN this|DT together|RB .|. 

Best|JJS ,|, Jeff|NNP 
-----|SYM Forwarded|NNP by|IN Jeff|NNP Dasovich|NNP /|NN NA|NNP /|NN Enron|NNP on|IN 02/16/2001|CD 08:27|NN AM|NNP -----|SYM 
Jeff|NNP Dasovich|NNP Sent|NNP by|IN :|: Jeff|NNP Dasovich|NNP 02/15/2001|CD 06:11|NN PM|NNP To|TO :|: jdasovic@enron.com|NN ,|, skean@enron.com|NN ,|, Richard|NNP Shapiro|NNP /|NN NA|NNP /|NN Enron|NNP @|IN En|NNP ron|NN ,|, James|NNP D|NNP Steffes|NNP /|NN NA|NNP /|NN Enron|NNP @|IN Enron|NNP cc|NN :|: Subject|NNP :|: 
Steve|NNP :|: Here|RB 's|VBZ a|DT substantially|RB more|RBR cleaned-version|JJ ,|, with|IN attachments|NNS .|. 
There|EX 's|VBZ a|DT hard|JJ copy|NN on|IN your|PRP$ chair|NN .|. 

Best|JJS ,|, Jeff|NNP -----|SYM Forwarded|NNP by|IN Jeff|NNP Dasovich|NNP /|NN NA|NNP /|NN Enron|NNP on|IN 02/15/2001|CD 05:57|NN PM|NNP -----|SYM 
Jeff|NNP Dasovich|NNP Sent|NNP by|IN :|: Jeff|NNP Dasovich|NNP 02/15/2001|CD 05:56|NN PM|NNP To|TO :|: jdasovic@enron.com|NN cc|NN :|: Subject|NNP :|: 
Jim|NNP :|: It|PRP was|VBD a|DT pleasure|NN speaking|VBG with|IN you|PRP yesterday|NN .|. 
Based|VBN on|IN our|PRP$ conversation|NN ,|, this|DT email|NN includes|VBZ the|DT following|VBG :|: 

An|DT Enron|NNP contact|NN to|TO discuss|VB developing|VBG small-scale|JJ generation|NN on|IN Tribal|NNP lan|NN ds|NNS .|. 

Our|PRP$ views|NNS on|IN the|DT impediments|NNS to|TO distributed|VBN generation|NN and|CC suggestions|NNS on|IN h|NN ow|NN to|TO remove|VB those|DT impediments|NNS .|. 

A|DT description|NN of|IN the|DT credit|NN issues|NNS that|WDT continue|VBP to|TO impede|VB DWR|NNP ,|, s|VBZ ability|NN to|TO sign|VB contracts|NNS with|IN power|NN suppliers|NNS ,|, and|CC options|NNS to|TO resolve|VB them|PRP .|. 
Two|CD possible|JJ options|NNS for|IN addressing|VBG the|DT credit|NN issue|NN are|VBP 1|CD )|) a|DT California|NNP PUC|NNP order|NN clarifying|VBG that|IN DWR|NNP will|MD recover|VB its|PRP$ power|NN purchase|NN costs|NNS through|IN rates|NNS ,|, and|CC 2|CD )|) an|DT amendment|NN to|TO AB|NNP 1|CD X|NNP designed|VBD to|TO accomplish|VB the|DT same|JJ goal|NN .|. 
I|PRP have|VBP attached|VBN talking|VBG points|NNS regarding|VBG the|DT California|NNP PUC|NNP order|NN and|CC propose|VB d|SYM amendments|NNS to|TO AB|NNP 1|CD X.|NN 
We|PRP believe|VBP that|IN an|DT amendment|NN to|TO AB|NNP 1|CD X|NNP is|VBZ the|DT preferable|JJ option|NN .|. 

Our|PRP$ assessment|NN of|IN the|DT supply|NN /|NN demand|NN picture|NN in|IN California|NNP .|. 

Our|PRP$ suggestions|NNS for|IN a|DT legislative|JJ package|NN designed|VBN to|TO solve|VB both|DT the|DT near-|NN and|CC long-term|JJ electricity|NN crisis|NN in|IN California|NNP .|. 
We|PRP will|MD deliver|VB to|TO your|PRP$ office|NN tomorrow|NN detailed|JJ legislative|JJ language|NN .|. 
In|IN those|DT materials|NNS we|PRP will|MD also|RB identify|VB existing|VBG bills|NNS that|IN we|PRP believe|VBP can|MD easily|RB accommodate|VB our|PRP$ proposed|JJ language|NN .|. 

I|PRP hope|VBP that|IN the|DT information|NN is|VBZ useful|JJ .|. 
Please|VB do|VBP not|RB hesitate|VB to|TO contact|VB m|NN e|SYM if|IN you|PRP would|MD like|VB to|TO discuss|VB these|DT materials|NNS further|RBR ,|, or|CC if|IN there|EX is|VBZ anythi|NN ng|NN else|RB that|IN I|PRP can|MD do|VB to|TO assist|VB you|PRP .|. 

Regards|NNP ,|, Ken|NNP 
Contact|NNP Information|NNP to|TO Discuss|NNP Interest|NNP Expressed|NNP by|IN Native|NNP American|NNP Tribes|NNP in|IN Installing|NNP Small-scale|NNP Generation|NNP on|IN Tribal|NNP Lands|NNP 
David|NNP Parquet|NNP ,|, Vice-|NNP President|NNP Enron|NNP North|NNP America|NNP 101|CD California|NNP Street|NNP ,|, Suite|NNP 1950|CD San|NNP Francisco|NNP ,|, CA|NNP 94111|CD Phone|NNP :|: 415.782|CD .7820|CD Fax|NNP :|: 415.782|CD .7851|CD 
2|CD .|. Key|NNP Barriers|NNP to|TO Distributed|VBN Generation|NNP 
Excessive|NNP and|CC Unnecessary|NNP Utility|NNP Stand-by|NNP Charges|NNS 
Solution|NN :|: The|DT executive|NN orders|NNS issued|VBN by|IN the|DT Governor|NNP on|IN February|NNP 14th|JJ took|VBD a|DT step|NN in|IN the|DT right|JJ direction|NN .|. 
Utility|NNP stand-by|JJ charges|NNS have|VBP always|RB been|VBN designed|VBN by|IN the|DT utilities|NNS to|TO protect|VB their|PRP$ monopoly|NN position|NN ,|, extract|VB monopoly|NN prices|NNS from|IN customers|NNS ,|, or|CC both|DT .|. 
But|CC there|EX is|VBZ no|DT reason|NN to|TO limit|VB t|NN he|PRP elimination|NN of|IN these|DT charges|NNS to|TO generation|NN facilities|NNS that|WDT are|VBP less|JJR than|IN 1|CD MW|NNP .|. 
These|DT limits|NNS will|MD only|RB lengthen|VB unnecessarily|RB the|DT time|NN it|PRP takes|VBZ for|IN California|NNP to|TO close|VB the|DT significant|JJ gap|NN between|IN supply|NN and|CC demand|NN and|CC reduc|NN e|SYM the|DT risk|NN of|IN black|JJ outs|NNS this|DT summer|NN .|. 
We|PRP would|MD propose|VB lifting|VBG the|DT cap|NN by|IN offering|VBG amendments|NNS to|TO SB|NNP 27|CD X|NNP ,|, which|WDT is|VBZ designed|VBN to|TO facilitate|VB development|NN o|NN f|SYM distributed|VBN generation|NN .|. 
Excessive|NNP delays|NNS and|CC costs|NNS related|VBN to|TO interconnecting|VBG facilities|NNS with|IN investor-owned|JJ and|CC municipal|JJ utilities|NNS 

Solution|NN :|: The|DT Governor|NNP ,|, s|VBZ executive|NN order|NN regarding|VBG interconnection|NN is|VBZ a|DT step|NN in|IN the|DT right|JJ direction|NN *|NN D-D-|NNP 26|CD -|: 01|CD requires|VBZ utilities|NNS to|TO complete|VB interconnection|NN studies|NNS within|IN 7|CD days|NNS .|. 
California|NNP should|MD ensure|VB that|IN this|DT requirement|NN applies|VBZ to|TO all|DT generation|NN facilities|NNS ,|, including|VBG distributed|VBN generation|NN .|. 
In|IN addition|NN ,|, the|DT financial|JJ conflicts|NNS the|DT utilities|NNS face|VBP when|WRB interconnecting|VBG generation|NN facilities|NNS are|VBP simply|RB too|RB powerful|JJ to|TO overcome|VB through|IN executive|NN orders|NNS or|CC other|JJ regulations|NNS .|. 
To|TO the|DT greatest|JJS extent|NN possible|JJ ,|, California|NNP should|MD shift|VB control|NN over|IN interconnection|NN away|RB from|IN th|NN e|SYM utility|NN and|CC place|NN that|DT control|NN with|IN the|DT California|NNP ISO|NNP .|. 
This|DT could|MD be|VB accomplished|VBN through|IN amendments|NNS to|TO SB|NNP 27|CD X.|NN 

Permitting|NNP and|CC Air|NNP Quality|NNP Issues|NNPS Developers|NNS of|IN distributed|VBN (|( i.e.|NN ,|, "|'' on-site|JJ "|'' )|) generation|NN that|WDT is|VBZ 50|CD MWs|NNP or|CC greater|JJR must|MD receive|VB certification|NN from|IN the|DT California|NNP Energy|NNP Commission|NNP an|DT d|SYM therefore|RB face|NN all|DT of|IN the|DT impediments|NNS to|TO development|NN that|IN large-scale|JJ generation|NN faces|NNS .|. 

Solution|NN :|: California|NNP should|MD ensure|VB that|IN the|DT executive|NN orders|NNS (|( D-|NNP 22|CD -|: 01|CD thru|NN D-|NNP 26|CD -|: 01|CD )|) issued|VBN by|IN the|DT Governor|NNP to|TO expedite|VB plant|NN siting|VBG and|CC maximize|VB plant|NN output|NN apply|VB equally|RB to|TO smaller|JJR scale|NN ,|, "|'' distributed|VBN generation|NN "|'' facil|NN ities|NNS .|. 
In|IN addition|NN ,|, distributed|VBN generation|NN that|WDT is|VBZ less|JJR than|IN 50|CD MWs|NNP continues|VBZ to|TO face|VB local|JJ opposition|NN .|. 
The|DT State|NNP should|MD ensure|VB that|IN local|JJ ,|, parochial|JJ interests|NNS can|MD not|RB block|VB otherwise|RB beneficial|JJ distributed|VBN generation|NN projects|NNS .|. 
These|DT objectives|NNS could|MD be|VB accomplished|VBN through|IN amendments|NNS to|TO SB|NNP 27|CD X.|NN 

3|CD .|. Credit|NNP Concerns|NNS Regarding|VBG Authority|NNP Granted|NNP to|TO DWR|NNP in|IN AB|NNP 1|CD X|NNP to|TO Purchase|NNP Electricity|NNP on|IN Behalf|NNP of|IN the|DT Utilities|NNP 
Enron|NNP responded|VBD to|TO the|DT RFP|NNP issued|VBN by|IN DWR|NNP to|TO enter|VB into|IN power|NN contracts|NNS with|IN suppliers|NNS .|. 
Enron|NNP is|VBZ in|IN active|JJ discussions|NNS with|IN DWR|NNP to|TO establish|VB contract|NN terms|NNS with|IN th|NN e|SYM goal|NN of|IN entering|VBG into|IN a|DT power|NN purchase|NN agreement|NN as|RB soon|RB as|IN possible|JJ .|. 
However|RB ,|, ambiguities|NNS contained|VBD in|IN AB|NNP 1|CD X|NNP have|VBP created|VBN significant|JJ credit|NN risk|NN concerns|NNS that|WDT need|VBP to|TO be|VB resolved|VBN in|IN order|NN to|TO finalize|NN contract|NN terms|NNS .|. 
We|PRP understand|VBP that|IN the|DT lion|NN ,|, s|VBZ share|NN of|IN counterparties|NNS share|VBP Enron|NNP ,|, s|VBZ c|SYM redit|NN risk|NN concerns|NNS .|. 
Enron|NNP has|VBZ proposed|VBN several|JJ options|NNS for|IN resolving|VBG the|DT credit|NN risk|NN issues|NNS and|CC is|VBZ working|VBG with|IN DWR|NNP to|TO arrive|VB at|IN a|DT solution|NN that|WDT is|VBZ mutually|RB agreeable|JJ to|TO both|DT sides|NNS and|CC that|DT might|MD serve|VB as|IN a|DT template|NN for|IN power|NN purchase|NN agreements|NNS going|VBG forward|RB .|. 

Summary|NNP of|IN the|DT Source|NN of|IN the|DT Credit|NNP Risk|NNP Issue|NN 
Ambiguous|NNP Ratemaking|NNP Authority|NNP The|DT language|NN in|IN AB|NNP 1|CD X|NNP is|VBZ ambiguous|JJ as|IN to|TO whether|IN DWR|NNP has|VBZ any|DT authority|NN to|TO charge|VB California|NNP ratepayers|NNS for|IN the|DT costs|NNS of|IN purchasing|VBG power|NN .|. 
From|IN our|PRP$ analysis|NN of|IN the|DT bill|NN ,|, the|DT language|NN in|IN AB|NNP 1|CD X|NNP appears|VBZ to|TO leave|VB intact|JJ the|DT California|NNP PUC|NNP ,|, s|VBZ exclusive|JJ jurisdiction|NN over|IN ratemaking|VBG in|IN California|NNP .|. 
As|IN such|JJ ,|, suppliers|NNS have|VBP no|DT assurance|NN that|IN the|DT PUC|NNP will|MD agree|VB to|TO include|VB in|IN rat|NN es|NNS adequate|JJ charges|NNS to|TO cover|VB DWR|NNP ,|, s|VBZ costs|NNS of|IN power|NN purchases|NNS .|. 

Ambiguous|NNP Regulatory|NNP Authority|NNP Regarding|VBG Contract|NN "|'' Prudence|NNP "|'' The|DT language|NN in|IN AB|NNP 1|CD X|NNP leaves|VBZ open|VB the|DT possibility|NN that|IN the|DT California|NNP Public|NNP Utilities|NNP Commission|NNP could|MD determine|VB that|IN power|NN purchases|NNS made|VBN by|IN DWR|NNP are|VBP "|'' imprudent|NN .|. "|'' 
On|IN the|DT basis|NN of|IN such|JJ a|DT finding|NN ,|, the|DT CPUC|NNP could|MD then|RB ref|NN use|NN to|TO allow|VB DWR|NNP to|TO collect|VB from|IN ratepayers|NNS the|DT costs|NNS associated|VBN with|IN its|PRP$ power|NN purchases|NNS .|. 
Consequently|RB ,|, suppliers|NNS have|VBP no|DT assurance|NN that|IN the|DT PUC|NNP will|MD agr|NN ee|NN to|TO include|VB in|IN rates|VBZ the|DT charges|NNS to|TO cover|VB the|DT costs|NNS of|IN power|NN contracts|NNS that|IN DWR|NNP has|VBZ entered|VBN into|IN with|IN suppliers|NNS .|. 
Ambiguous|NNP Language|NNP Regarding|VBG the|DT Ratemaking|NNP Mechanism|NNP that|WDT Will|MD Be|VB Used|VBN to|TO Recover|NNP DWR|NNP ,|, s|VBZ Costs|NNS of|IN Power|NNP Purchases|NNP In|IN addition|NN to|TO the|DT ambiguity|NN regarding|VBG ratemaking|VBG and|CC regulatory|JJ authority|NN noted|VBD above|IN ,|, the|DT language|NN in|IN the|DT bill|NN is|VBZ equally|RB ambiguous|JJ with|IN respect|NN to|TO the|DT specific|JJ ratemaking|VBG "|'' mechanics|NNS "|'' that|IN AB|NNP 1|CD X|NNP directs|VBZ the|DT PUC|NNP to|TO empl|NN oy|NN to|TO permit|VB DWR|NNP to|TO recover|VB its|PRP$ power|NN purchase|NN costs|NNS .|. 
Based|VBN on|IN our|PRP$ analysis|NN ,|, it|PRP i|NNP s|VBZ extremely|RB difficult|JJ to|TO determine|VB how|WRB the|DT PUC|NNP would|MD design|VB the|DT rates|NNS to|TO ensu|NN re|NN DWR|NNP recovers|VBZ its|PRP$ power|NN purchase|NN costs|NNS .|. 
Moreover|RB ,|, as|RB currently|RB drafted|VBN ,|, it|PRP is|VBZ difficult|JJ to|TO determine|VB whether|IN AB|NNP 1|CD X|NNP would|MD even|RB permit|VB the|DT PUC|NNP to|TO include|VB in|IN rates|NNS all|DT of|IN the|DT charges|NNS necessary|JJ to|TO fully|RB recover|VB DWR|NNP ,|, s|VBZ power|NN purchase|NN costs|NNS .|. 
Again|RB ,|, this|DT ambiguity|NN raises|VBZ significant|JJ credit|NN risk|NN concerns|NNS since|IN suppliers|NNS have|VBP little|JJ assurance|NN that|IN DWR|NNP will|MD have|VB the|DT ability|NN to|TO recover|VB from|IN ratepayers|NNS the|DT costs|NNS of|IN purchasing|VBG power|NN .|. 

Options|NNS to|TO Resolve|NNP Concerns|NNS Regarding|VBG Credit|NNP Risk|NNP 
We|PRP have|VBP been|VBN working|VBG diligently|RB with|IN DWR|NNP officials|NNS to|TO resolve|VB the|DT credit|NN ri|NN sk|NN issues|NNS .|. 
We|PRP have|VBP identified|VBN three|CD options|NNS :|: 

Amend|NNP AB|NNP 1|CD X|NNP The|DT amendments|NNS ,|, which|WDT are|VBP attached|VBN to|TO this|DT email|NN ,|, would|MD clarify|VB that|IN a|DT )|) the|DT PUC|NNP would|MD accept|VB as|IN "|'' prudent|JJ and|CC reasonable|JJ "|'' all|DT purchase|NN costs|NNS incur|VBP red|JJ by|IN DWR|NNP ,|, and|CC b|SYM )|) the|DT PUC|NNP is|VBZ obligated|VBN to|TO include|VB in|IN rates|VBZ the|DT charges|NNS necessary|JJ to|TO ensure|VB that|IN DWR|NNP fully|RB recovers|VBZ its|PRP$ costs|NNS of|IN power|NN purchases|NNS .|. 
This|DT is|VBZ the|DT preferred|JJ option|NN ,|, though|IN we|PRP understand|VBP that|IN the|DT there|EX may|MD be|VB some|DT political|JJ challenges|NNS standing|VBG in|IN the|DT way|NN of|IN amending|VBG AB|NNP 1|CD X.|NN (|( See|VB attached|VBN file|VB entitled|VBN ,|, "|'' AmendAB1X.doc|NNP "|'' .|. )|) 

Clarify|NNP the|DT Ambiguities|NNP in|IN AB|NNP 1|CD X|NNP through|IN an|DT Order|NNP Issued|NNP by|IN the|DT PUC|NNP ,|, and|CC through|IN Contract|NNP Language|NNP This|DT is|VBZ the|DT option|NN that|IN we|PRP are|VBP currently|RB working|VBG with|IN DWR|NNP officials|NNS to|TO implement|VB .|. 
However|RB ,|, it|PRP is|VBZ more|RBR complicated|JJ and|CC could|MD take|VB significantly|RB mo|NN re|NN time|NN to|TO implement|VB than|IN the|DT "|'' legislative|JJ "|'' fix|VB .|. 
We|PRP have|VBP attached|VBN electronic|JJ copies|NNS of|IN the|DT talking|VBG points|NNS related|VBN to|TO the|DT order|NN that|IN the|DT California|NNP PUC|NNP would|MD need|VB to|TO issue|VB under|IN this|DT option|NN .|. 
(|( See|VB attached|VBN file|VB entitled|VBN ,|, "|'' cpuctalkingpoints|NNS .|. doc|NN .|. "|'' )|) 

Make|VB Use|NN of|IN Other|NNP Instruments|NNP Designed|NNP to|TO Address|NNP Credit|NNP Risk|NNP As|IN indicated|VBD in|IN our|PRP$ letter|NN responding|VBG to|TO DWR|NNP 's|POS RFP|NNP ,|, we|PRP are|VBP willing|JJ to|TO ac|NN cept|NN other|JJ forms|NNS of|IN credit|NN from|IN DWR|NNP .|. 
Those|DT options|NNS include|VBP a|DT letter|NN of|IN credit|NN ,|, cash|NN prepayment|NN ,|, or|CC an|DT acceptable|JJ form|NN of|IN collateral|NN .|. 
DWR|NNP officials|NNS have|VBP indicated|VBN to|TO us|PRP that|IN DWR|NNP prefers|VBZ to|TO pursue|VB the|DT second|JJ options|NNS .|. 
That|DT is|VBZ ,|, DWR|NNP prefers|VBZ to|TO clarify|VB the|DT ambiguities|NNS in|IN AB|NNP 1|CD X|NNP through|IN a|DT PUC|NNP order|NN and|CC through|IN contract|NN amendments|NNS .|. 

4|CD .|. California|NNP 's|POS Supply-demand|NNP Picture|NNP Heading|VBG into|IN Summer|NNPS 2001|CD 
Both|DT the|DT California|NNP Energy|NNP Commission|NNP and|CC Cambridge|NNP Energy|NNP Research|NNP Associates|NNPS (|( CERA|NNP )|) ,|, a|DT private|JJ sector|NN energy|NN think|VBP tank|NN ,|, have|VBP issued|VBN reports|NNS showing|VBG that|IN California|NNP faces|VBZ a|DT severe|JJ supply-demand|JJ imbalance|NN .|. 
They|PRP diffe|NN r|LS only|RB on|IN how|WRB much|JJ and|CC how|WRB soon|RB additional|JJ supply|NN will|MD be|VB made|VBN available|JJ .|. 
Al|NNP l|NN credible|JJ sources|NNS agree|VBP that|DT supply|NN will|MD be|VB very|RB tight|JJ throughout|IN the|DT Summer|NNPS of|IN 2001|CD and|CC that|IN unless|IN a|DT solution|NN is|VBZ found|VBN immediately|RB ,|, blackouts|NNS are|VBP likely|JJ .|. 

CEC|NNP and|CC CERA|NNP both|DT forecast|NN that|IN California|NNP will|MD be|VB short|JJ of|IN supply|NN this|DT summer|NN by|IN approximately|RB 5,000|CD MW|NNP .|. 
These|DT numbers|NNS are|VBP in|IN line|NN with|IN our|PRP$ estimates|NNS .|. 
California|NNP 's|POS supply|NN base|NN currently|RB has|VBZ a|DT 6|CD %|NN capacity|NN margin|NN ,|, well|RB below|IN the|DT average|JJ 15|CD -|: 20|CD %|NN ,|, which|WDT is|VBZ recommended|VBN for|IN reliable|JJ system|NN operatio|NN n|NN in|IN the|DT West|NNP .|. 
Since|IN the|DT West|NNP relies|VBZ more|RBR heavily|RB upon|IN hydroelectric|JJ power|NN than|IN other|JJ regions|NNS ,|, reserves|NNS are|VBP particularly|RB important|JJ ,|, owing|VBG to|TO the|DT unpredictability|NN of|IN the|DT weather|NN and|CC the|DT dry|JJ year|NN the|DT West|NNP has|VBZ experienced|VBN t|NN o|NN date|NN .|. 
In|IN the|DT event|NN of|IN a|DT low|JJ rain|NN and|CC snow|NN period|NN ,|, the|DT system|NN must|MD possess|VB t|NN he|PRP flexibility|NN to|TO respond|VB to|TO the|DT reduced|JJ availability|NN of|IN power|NN supply|NN .|. 
California|NNP 's|POS very|RB low|JJ reserve|NN margin|NN makes|VBZ it|PRP especially|RB susceptible|JJ to|TO this|DT requirement|NN .|. 

Other|JJ reasons|NNS for|IN reduced|VBN supply|NN for|IN the|DT Summer|NNPS of|IN 2001|CD include|VBP the|DT early|JJ draw-down|JJ of|IN reservoirs|NNS in|IN the|DT continual|JJ effort|NN to|TO manage|VB California|NNP 's|POS seve|NN re|NN supply-demand|JJ gap|NN ;|: emissions|NNS restrictions|NNS on|IN existing|VBG plants|NNS ;|: and|CC a|DT reduced|JJ number|NN of|IN customers|NNS who|WP can|MD be|VB curtailed|VBN under|IN their|PRP$ contracts|NNS with|IN the|DT utilities|NNS .|. 
Cambridge|NNP Energy|NNP Research|NNP Associates|NNPS asserts|VBZ that|IN at|IN the|DT curren|NN t|NN pace|NN of|IN siting|VBG ,|, permitting|VBG and|CC construction|NN ,|, adequate|JJ supplies|NNS will|MD not|RB be|VB added|VBN to|TO correct|VB the|DT market|NN imbalance|NN until|IN 2003|CD at|IN the|DT earliest|JJS .|. 

CERA|NNP predicts|VBZ that|IN California|NNP is|VBZ likely|JJ to|TO face|VB approximately|RB 20|CD hours|NNS of|IN rolling|VBG black|JJ outs|NNS this|DT summer|NN .|. 
The|DT CEC|NNP paints|NNS a|DT considerably|RB more|RBR optimistic|JJ scenario|NN ,|, betting|VBG that|IN California|NNP will|MD bring|VB an|DT additional|JJ 5,000|CD MWs|NNP on|IN line|NN to|TO meet|VB peaking|VBG summer|NN demand|NN .|. 
It|PRP is|VBZ our|PRP$ view|NN that|IN California|NNP should|MD view|VB the|DT CEC|NNP 's|POS "|'' rosy|JJ scenario|NN "|'' with|IN considerable|JJ skepticism|NN .|. 

5|CD .|. Suggested|NNP Package|NNP of|IN Legislative|NNP Proposals|NNS Designed|NNP to|TO Solve|NNP California|NNP 's|POS Electricity|NNP Crisis|NNP 
This|DT email|NN offers|VBZ an|DT overview|NN of|IN our|PRP$ proposed|VBN legislative|JJ solution|NN .|. 
We|PRP wil|NN l|NN deliver|VB to|TO your|PRP$ office|NN tomorrow|NN specific|JJ legislative|JJ language|NN and|CC existing|VBG bills|NNS that|IN we|PRP believe|VBP can|MD accommodate|VB our|PRP$ proposals|NNS .|. 

As|IN we|PRP have|VBP suggested|VBN throughout|IN the|DT crisis|NN ,|, any|DT solution|NN to|TO California|NNP 's|POS crisis|NN must|MD focus|VB on|IN four|CD issues|NNS :|: 

Increase|VB supply|NN Decrease|NNP demand|NN Establish|VB a|DT truly|RB competitive|JJ retail|JJ electricity|NN market|NN Return|NN California|NNP 's|POS Investor-owned|NNP utilities|NNS to|TO solvency|NN 

Increase|VB supply--|JJ Legislative|NNP vehicle|NN :|: SB28X|NNP (|( Sher|NNP )|) To|TO site|NN and|CC construct|VB a|DT power|NN plant|NN in|IN Texas|NNP takes|VBZ approximately|RB 2|CD years|NNS .|. 
Enron|NNP and|CC others|NNS have|VBP completed|VBN the|DT entire|JJ process|NN in|IN other|JJ states|NNS in|IN less|JJR than|IN a|DT year|NN .|. 
In|IN California|NNP ,|, it|PRP takes|VBZ about|IN six|CD years|NNS ,|, or|CC longer|RBR .|. 

The|DT Governor|NNP 's|POS executive|NN orders|NNS and|CC Senator|NNP Sher|NNP 's|POS siting|VBG reform|NN legi|NN slation|NN are|VBP steps|NNS in|IN the|DT right|JJ direction|NN .|. 
Our|PRP$ suggested|JJ amendments|NNS can|MD improve|VB tho|NN se|FW efforts|NNS by|IN further|JJ addressing|VBG the|DT difficulties|NNS that|WDT project|NN developers|NNS face|VBP in|IN securing|VBG air|NN emission|NN reduction|NN credits|NNS to|TO meet|VB the|DT air|NN permit|NN requirements|NNS included|VBN in|IN the|DT CEC|NNP 's|POS certification|NN requirements|NNS .|. 
Enron|NNP 's|POS proposal|NN seeks|VBZ to|TO streamline|VB the|DT process|NN for|IN 1|CD )|) obtaining|VBG credits|NNS and|CC 2|CD )|) transfering|VBG credits|NNS between|IN air|NN districts|NNS .|. 
In|IN addition|NN ,|, it|PRP creates|VBZ an|DT innovative|JJ emissions|NNS reduction|NN bank|NN to|TO allow|VB project|NN sponsors|NNS to|TO fund|VB emissions|NNS in|IN advance|NN of|IN obtaining|VBG certification|NN ,|, and|CC permits|VBZ the|DT affected|VBN a|DT ir|NN districts|NNS to|TO use|VB those|DT funds|NNS to|TO finance|VB projects|NNS that|WDT will|MD produce|VB the|DT required|JJ reductions|NNS in|IN pollution|NN emissions|NNS .|. 

Decrease|NNP demand|NN *|NN Legislative|NNP Vehicle|NNP :|: AB|NNP 31|CD X|NNP (|( Wright|NNP )|) Because|IN of|IN the|DT delay|NN in|IN getting|VBG a|DT solution|NN in|IN place|NN in|IN California|NNP ,|, closing|VBG the|DT supply-demand|JJ gap|NN through|IN energy|NN conservation|NN and|CC efficiency|NN offers|VBZ the|DT best|JJS chance|NN of|IN avoiding|VBG blackouts|NNS this|DT summer|NN .|. 
This|DT can|MD be|VB accomplished|VBN mo|NN st|NN effectively|RB and|CC quickly|RB in|IN two|CD ways|NNS :|: 

Buy-down|NNP demand|NN California|NNP is|VBZ tapping|VBG into|IN an|DT enormous|JJ amount|NN of|IN money|NN from|IN the|DT General|NNP Fun|NNP d|SYM to|TO finance|VB DWR|NNP 's|POS power|NN purchases|NNS .|. 
California|NNP could|MD likely|RB reduce|VB demand|NN more|RBR economically|RB by|IN running|VBG an|DT auction|NN to|TO determine|VB the|DT payments|NNS businesses|NNS wou|NN ld|NN be|VB willing|JJ to|TO receive|VB to|TO reduce|VB their|PRP$ demand|NN for|IN a|DT sustained|JJ period|NN (|( e.g.|NN ,|, through|IN the|DT summer|NN months|NNS )|) .|. 
DWR|NNP could|MD easily|RB run|VB an|DT on-line|JJ auction|NN to|TO determine|VB the|DT price|NN it|PRP could|MD pay|VB for|IN these|DT demand|NN reductions|NNS .|. 
To|TO participate|VB ,|, businesses|NNS would|MD be|VB required|VBN to|TO have|VB the|DT metering|VBG equipment|NN necessary|JJ to|TO monitor|VB and|CC verify|VB that|IN they|PRP are|VBP actually|RB achieving|VBG the|DT reductions|NNS .|. 
Enron|NNP has|VBZ developed|VBN an|DT on-line|JJ auction|NN software|NN package|NN ,|, "|'' D|NNP eal|NN Bench|NNP ,|, "|'' that|IN it|PRP would|MD be|VB willing|JJ to|TO contribute|VB to|TO the|DT effort|NN .|. 

Use|NNP Price|NNP Signals|NNP to|TO Incent|NNP Voluntary|NNP Curtailment|NNP To|TO be|VB successful|JJ ,|, customers|NNS need|VBP access|NN to|TO the|DT following|VBG key|JJ elements|NNS :|: 

An|DT internet|NN based|VBD hour-ahead|JJ price|NN posting|VBG system|NN to|TO track|VB the|DT market|NN price|NN for|IN hour-ahead|JJ power|NN in|IN real|JJ time|NN .|. 
Real-time|NNP metering|VBG systems|NNS for|IN baseline|NN demand|NN and|CC voluntarily|RB curtailment|NN verification|NN .|. 
Settlement|NNP process|NN that|WDT allows|VBZ for|IN market|NN clearing|NN prices|NNS of|IN energy|NN to|TO be|VB paid|VBN for|IN load|NN reduction|NN (|( "|'' Negawatts|NNP "|'' )|) .|. 

The|DT potential|JJ benefits|NNS of|IN an|DT effective|JJ demand|NN response|NN program|NN would|MD includ|NN e|SYM :|: 

"|'' creation|NN "|'' of|IN additional|JJ summer|NN peaking|VBG capacity|NN in|IN California|NNP ,|, parti|NN cularly|RB in|IN the|DT short|JJ term|NN ,|, without|IN requiring|VBG construction|NN of|IN additional|JJ generation|NN resources|NNS .|. 
reduction|NN of|IN peak|NN or|CC super-peak|JJ load|NN on|IN the|DT over-stressed|JJ California|NNP electric|JJ system|NN ,|, thus|RB potentially|RB reducing|VBG the|DT overall|JJ cost|NN of|IN electricity|NN in|IN the|DT state|NN .|. 
fostering|VBG of|IN demand|NN elasticity|NN without|IN subjecting|VBG customers|NNS to|TO the|DT full|JJ ris|NNS k|NN of|IN hourly|JJ market|NN price|NN volatility|NN by|IN passing|VBG market|NN price|NN signals|NNS to|TO customers|NNS and|CC allowing|VBG them|PRP to|TO voluntarily|RB shed|VB load|NN and|CC be|VB compensated|VBN for|IN responding|VBG .|. 

We|PRP estimate|VBP that|IN we|PRP could|MD generate|VB a|DT summer|NN 2001|CD on-peak|JJ demand|NN response|NN in|IN excess|NN of|IN 400|CD MW|NNP during|IN certain|JJ high|JJ cost|NN hours|NNS ,|, and|CC a|DT demand|NN response|NN for|IN summer|NN 2002|CD on-peak|JJ hours|NNS that|WDT could|MD exceed|VB 1000|CD MW|NNP .|. 
We|PRP further|JJ estimate|NN that|IN the|DT market|NN response|NN to|TO this|DT program|NN from|IN all|DT ESPs|NNPS could|MD be|VB 2|CD to|TO 3|CD time|NN s|VBZ that|DT amount|NN .|. 
We|PRP recommend|VBP that|IN the|DT State|NNP of|IN California|NNP provide|VB rebates|NNS directly|RB to|TO customers|NNS to|TO fund|VB the|DT installation|NN of|IN advanced|VBD metering|VBG and|CC control|NN systems|NNS that|WDT would|MD support|VB load|NN curtailment|NN implementation|NN .|. 

Establish|VB a|DT truly|RB competitive|JJ retail|JJ electricity|NN market|NN *|NN Legislative|NNP vehi|NN cle|NN :|: SB|NNP 27|CD X|NNP 
The|DT only|JJ customers|NNS who|WP were|VBD protected|VBN from|IN price|NN volatility|NN in|IN San|NNP Diego|NNP we|PRP re|NN customers|NNS who|WP chose|VBD Direct|NNP Access|NNP and|CC signed|VBD fixed|VBN price|NN deals|NNS with|IN energy|NN service|NN providers|NNS .|. 
Ironically|RB ,|, AB|NNP 1|CD X|NNP takes|VBZ that|IN important|JJ option|NN away|RB from|IN customers|NNS and|CC businesses|NNS .|. 
It|PRP is|VBZ critical|JJ that|IN AB|NNP 1|CD X|NNP be|VB amended|VBN to|TO remove|VB th|NN e|SYM prohibition|NN against|IN Direct|NNP Access|NNP .|. 

Enron|NNP 's|POS legislative|JJ proposal|NN would|MD give|VB customers|NNS freedom|NN to|TO enter|VB into|IN a|DT direct|JJ access|NN transaction|NN ,|, while|IN simultaneously|RB addressing|VBG the|DT Department|NNP o|NN f|SYM Water|NNP Resources|NNPS '|POS concerns|NNS about|IN stranded|VBN power|NN costs|NNS that|WDT might|MD result|VB from|IN customer|NN migration|NN .|. 

In|IN addition|NN ,|, California|NNP will|MD only|RB achieve|VB a|DT competitive|JJ retail|JJ market|NN when|WRB the|DT utility|NN is|VBZ removed|VBN completely|RB from|IN the|DT procurement|NN function|NN .|. 
Procureme|NNP nt|RB is|VBZ not|RB a|DT utility|NN core|NN competency|NN ,|, as|IN evidenced|VBN by|IN the|DT dire|JJ financial|JJ condition|NN in|IN which|WDT the|DT utilities|NNS now|RB find|VBP themselves|PRP .|. 
California|NNP should|MD therefore|RB begin|VB immediately|RB to|TO phase|VB the|DT utility|NN out|IN of|IN the|DT procurement|NN function|NN entirely|RB ,|, with|IN the|DT goal|NN of|IN having|VBG all|DT customers|NNS served|VBN by|IN a|DT non-utility|JJ provider|NN within|IN 36|CD months|NNS .|. 
To|TO execute|VB the|DT transition|NN ,|, California|NNP should|MD hold|VB a|DT series|NN of|IN competitive|JJ solicitations|NNS over|IN the|DT 36|CD -|: month|NN period|NN in|IN which|WDT competing|VBG service|NN providers|NNS would|MD bid|VB for|IN the|DT right|NN to|TO serve|VB segments|NNS of|IN utility|NN load|NN .|. 

Return|NN California|NNP 's|POS Investor-owned|NNP utilities|NNS to|TO solvency|NN *|NN Legislative|NNP vehicle|NN :|: AB|NNP 18|CD X|NNP 
Utility|NNP bankruptcy|NN will|MD not|RB increase|VB supply|NN and|CC it|PRP will|MD not|RB decrease|VB demand|NN .|. 
In|IN short|JJ ,|, bankruptcy|NN does|VBZ nothing|NN to|TO solve|VB California|NNP 's|POS supply-demand|JJ imbalance|NN .|. 
In|IN addition|NN ,|, bankruptcy|NN increases|VBZ the|DT likelihood|NN that|IN consumers|NNS and|CC businesses|NNS will|MD bear|VB the|DT significant|JJ financial|JJ risks|NNS of|IN having|VBG California|NNP State|NNP government|NN assume|VBP the|DT role|NN of|IN "|'' electricity|NN buyer|NN "|'' for|IN an|DT extended|JJ period|NN of|IN time|NN .|. 
Finally|RB ,|, bankruptcy|NN will|MD undermine|VB both|DT investor|NN confidence|NN in|IN California|NNP 's|POS energy|NN markets|NNS and|CC the|DT private|JJ sector|NN 's|POS willingness|NN to|TO participate|VB in|IN that|DT market|NN .|. 

California|NNP can|MD return|VB the|DT utilities|NNS to|TO financial|JJ solvency|NN by|IN implementing|VBG a|DT series|NN of|IN staged|VBD rate|NN increases|NNS .|. 
California|NNP should|MD design|VB those|DT rate|NN increases|NNS with|IN the|DT dual|JJ goal|NN of|IN returning|VBG the|DT utilities|NNS to|TO solvency|NN without|IN "|'' shocking|JJ "|'' the|DT economy|NN or|CC household|NN budgets|NNS For|IN example|NN ,|, California|NNP could|MD amortize|VB the|DT recovery|NN of|IN the|DT utilities|NNS ,|, past|JJ debt|NN over|IN a|DT 5|CD -|: 10|CD year|NN period|NN .|. 
In|IN addition|NN ,|, the|DT magnitude|NN of|IN the|DT rate|NN increase|NN can|MD be|VB reduced|VBN in|IN two|CD ways|NNS :|: First|CD ,|, the|DT utilities|NNS could|MD absorb|VB some|DT portion|NN of|IN their|PRP$ existing|VBG debt|NN in|IN recognition|NN of|IN the|DT risk|NN they|PRP accepted|VBD when|WRB they|PRP agreed|VBD to|TO the|DT structure|NN of|IN AB|NNP 1890|CD .|. 
Second|JJ ,|, California|NNP can|MD "|'' net|JJ "|'' the|DT revenues|NNS the|DT utilities|NNS have|VBP r|LS eceived|JJ from|IN selling|VBG electricity|NN into|IN the|DT Power|NNP Exchange|NNP against|IN the|DT debts|NNS they|PRP hav|NN e|SYM accrued|VBN due|JJ to|TO the|DT retail|JJ price|NN cap|NN .|. 

